[K Insurance Trapped by Regulations - Part 2] Wasting 300 Million Sheets of Paper on Indemnity Claims... It's Time to Change the Outdated System

38 Million Enrolled in Real-World Medical Insurance
47% of Subscribers Give Up Claiming Benefits
"Must Get Documents from Hospital... Wastes Time and Money"
Ruling and Opposition Parties Propose Simplified Claim Bill
Medical Community Opposes Excessive Workload

[Asia Economy Reporter Oh Hyung-gil] There is a peculiar type of insurance where half of the consumers who have subscribed are eligible to receive insurance payouts but do not file claims.

The main subject is the indemnity medical insurance, which has 38 million subscribers and is called the "second national health insurance." The claim filing rate is low because consumers find it bothersome to visit hospitals to obtain documents and submit them to insurance companies, and the reimbursement amounts are relatively small.

The insurance industry has been advocating for over ten years to simplify the current claim process, which causes inconvenience not only to consumers but also to hospitals and insurance companies. However, the outdated system remains, where consumers face inconvenience, medical institutions must issue paperwork, and insurers manually input data into their systems.

An executive from a non-life insurance company pointed out, "Although the Fourth Industrial Revolution and digital innovation are rapidly spreading, indemnity medical insurance claims still rely on paper documents. Over 80 million medical verification documents are issued annually for indemnity insurance claims, and if each claim requires four sheets, that amounts to 320 million sheets of paper."

However, with both ruling and opposition parties in the 21st National Assembly jointly proposing bills to simplify indemnity insurance claims, the non-life insurance industry expects that this long-standing issue, unresolved for over a decade, will finally be addressed in this session of the National Assembly.

47% of Subscribers Do Not File Indemnity Insurance Claims

Most indemnity insurance consumers are giving up their rights. According to a survey conducted in January last year by the Financial Services Commission and the Ministry of Health and Welfare, 47.5% of those eligible to claim indemnity insurance benefits did not file claims. They cited small payout amounts and the hassle of visiting hospitals as reasons for not claiming. A significant number also mentioned lack of time.

So far, the insurance industry has expanded claim methods from in-person visits to fax, mail, photos, emails, and applications (apps), but the claim rate has barely increased. Among those who do file claims, many do so through agents acting on their behalf.

The problem arises from the complicated procedures. Indemnity insurance subscribers must obtain paper documents required for claims from medical institutions and submit them to insurers. This process consumes additional time and costs, which is a major reason why many give up on filing claims.

Medical institutions also face workload burdens from producing large volumes of paper documents. The National Cancer Center and Seoul Samyook Hospital requested standardization of data transmission methods and expanded insurer participation at the 'Insurtech-based Indemnity Medical Insurance Simplified Claim Demonstration and Meeting' hosted by the Financial Services Commission in 2018. Some large hospitals have partnered with insurers to develop systems to simplify indemnity insurance claims.

Insurers are also experiencing an increase in administrative tasks such as receiving paper documents, reviewing them, inputting data into systems, and storing records. Even when claims are filed via fax or smartphone apps, insurers must review documents on screens, limiting the reduction of workload.

Need for Social Consensus Amid Medical Community Concerns

In July, both ruling and opposition parties proposed amendments to the Insurance Business Act to simplify indemnity insurance claims.

Jeon Jae-su of the Democratic Party proposed that insurers outsource the construction and operation of an electronic claim system to specialized intermediary organizations. Yoon Chang-hyun of the People Power Party included provisions to entrust this to the Health Insurance Review and Assessment Service.

The bill stipulates that insurance consumers can request medical institutions to electronically transmit medical expense verification documents to insurers, following the Medical Service Act, which requires immediate transmission of copies of medical records to designated recipients upon patient request.

The problem is that opposition from the medical community remains strong. The medical sector fears disputes over responsibility among medical institutions, intermediary organizations, and insurers if patient personal information is leaked, and worries about excessive administrative burdens caused by the claim procedures.

The Korea Hospital Association issued a statement last month saying, "The bill shifts the task of medical expense claims under private insurance contracts to medical institutions under the guise of consumer convenience," and argued that "the indemnity insurance claim simplification bill should be scrapped." They believe the bill could lead to future premium increases or reductions in medical fees rather than consumer benefits.

However, the amendment specifies that the documents subject to transmission will be determined by presidential decree or the Financial Services Commission, and requires measures to prevent data leaks. The insurance industry explains that digitizing document issuance will actually reduce the workload of medical institutions.

An official from the Insurance Association emphasized, "Claim simplification only digitizes the claim procedure and is unrelated to the outsourcing of non-reimbursable medical expense reviews," adding, "It clearly states that information and data obtained during document transmission must not be used or stored for other purposes such as non-reimbursable reviews, which should alleviate concerns from the medical community."

Researcher Jo Yong-woon from the Korea Insurance Research Institute suggested, "Some insurers and care institutions have tried to establish claim systems through kiosks or apps but were not successful. Connecting the insurance intermediary centers linked to insurer networks with the Health Insurance Review and Assessment Service connected to care institution networks could reduce burdens for all parties."

[Image source=Yonhap News]

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